February 2010

[Ally]

Worst is over in Oilpatch

It`s been a tough week for the integrated oil and gas companies around the globe. No matter who came out with fourth-quarter results, the song remained the same: the companies made money, but not quite as much as the market was expecting and, as a result, share prices sank.

Once again, the focus was on earnings -- a number obscured by all sorts of "noise," instead of the key measure of an energy company`s ability to reinvest and grow its business -- cash flow.

Suncor, releasing its first full quarter as the country`s largest integrated oil and gas company, weighed in with $457 million in net income compared with a loss of $215 million for the same period last year. The cash flow numbers were even more impressive: $1.1 billion compared with $231 million last year. But it wasn`t enough to cheer investors as they bailed on Suncor`s shares.

The same held true for Imperial Oil -- which apparently also disappointed shareholders with net income of $534 million, or 62 cents a share. Lost in translation, it seems, was the fact that the world is still in tepid recovery mode, oil prices aren`t exactly in the stratosphere and Imperial is spending billions on its Kearl Lake oilsands project.

Husky Energy also made money in the fourth quarter, posting net income of $320 million compared with $231 million and doubling its cash flow from the same period last year -- coming in at $657 million versus $330 million. This wasn`t good enough for the market, either.

Read the full article here.

 

[Ally]

Shell cut 1,000 Jobs as profits collapse

Royal Dutch Shell said it planned even deeper cuts to its oil refining and retail operations after downstream weakness caused a 75 per cent fall in fourth-quarter profits to $1.18 billion US.

Chief executive Peter Voser pledged $1 billion US in cost cuts and 1,000 job reductions in 2010 -- mainly to come from the downstream unit -- and upped his target for refinery divestments.

Europe`s second-largest oil company by market value added it would continue to shift the focus of its downstream business to Asia, where rising fuel demand could ensure better profits.

Shell also affi rmed its targets to increase oil and gas production, the main driver for oil companies` earnings, by two to three per cent over 2009-12, but analysts said investors` near-term focus would stay on the downstream.

"The strong growth story remains overshadowed by Shell`s refining exposure," said Alexandre Weinberg, oil analyst at Petercam.

Read the full article here.

 

[Ally]

Alberta workers see rosy future

Albertans increasingly believe the job market is on the mend, buoying consumer confidence for spending as the province crawls out of a recession, a new survey shows.

Business leaders are even more optimistic the economy is steadily improving, a sign that hiring may soon follow, the latest poll from PricewaterhouseCoopers found.

The results of the survey, conducted by Leger Marketing and provided exclusively to the Herald, found overall confidence rose to 113, up two points from the survey released in December.

An index above 100 reflects an optimistic sentiment.

The business confidence index rose to 115 -- the highest level since it began in February 2007 -- the fifth consecutive survey to show an increase.

Read the full article here.

 

[Ally]

Alberta unemployment holds at 6.6%

Alberta`s unemployment rate held steady in January at 6.6 per cent, as fewer people looking for work offset job losses following two months of gains, Statistics Canada said Friday.

But analysts said the numbers may also signal a shift toward a more stable job market, as losses in part-time positions overshadowed full-time gains last month.

But there were also fewer people looking for work in January, either having given up or left the province.

In Alberta, there were 7,700 fewer jobs in January compared with December. Losses of 13,900 part-time jobs offset a gain of 6,300 full-time positions last month.

Alberta lagged the national trend, where 43,000 jobs were added, although most were part-time, economists noted.

Read the full article here.

 

[Ally]

Alberta`s 2010-11 Budget - "Provincial Fiscal Tables" update

The updated edition of RBC Economics Research`s "Provincial Fiscal Tables" is now posted on our website (see link below).

It includes the new information from Alberta`s 2010-11 Budget released on February 9, 2010.

Summary of key points

* Alberta`s budget projects a deficit of $4.7 billion for 2010-11. The deficit is forecast to shrink to $1.1 billion in 2010-12, setting a stage for a small surplus of $505 million in 2010-12

* The Alberta government will continue to dip into the Sustainability Fund to offset the deficits in the next two years. The Fund is projected to decrease from $15.0 billion at the end of 2009-10 to $2.8 billion at the end of 2012-13.

* Total revenues are projected to rise by 1.3% in 2010-11 to $34 billion. There is an expectation for a much stronger growth of 9.8% in 2011-12.

* Operating expenses will continue to grow strongly in 2010-11, increasing by $1.7 billion to $33.2 billion. A good portion of this increase, however, is due to a one-time $759 million provision to eliminate Alberta Health Services` accumulated deficit.

* The provincial government forecasts real GDP at 2.6% this year and 2.9% in 2011.

Click here to view the tables.

 

[Ally]

Cenovus ramps up oil sands development

Less than three months after striking out on its own, Cenovus Energy Inc. (CVE-T25.10-0.35-1.38%) is taking an aggressive new stance on oil sands development, moving up its timeline for a major push by as much as a year.

With its new-found freedom to direct capital spending now that it is independent from EnCana Corp., (ECA-T33.680.611.84%) Cenovus said it`s also redoubling efforts to develop promising projects.

That brought a welcome response from investors, whose positive reaction to the first post-split earnings reports from both companies stands in stark contrast to the drubbing they have delivered Suncor Energy Inc. The energy giant`s mega-merger with Petro-Canada met a much more hostile reaction after it posted disappointing earnings earlier this month and shares sank.

While the Suncor marriage with Petro-Canada is off to a rocky start, EnCana and Cenovus seem to be enjoying the single life. EnCana, for example, says its cost-trimming efforts have doubled an internal target. That, and some savvy bets on the price of natural gas, allowed it to beat earnings expectations in its first quarter as a pared-down company, and left it with enough money that it will look to acquisitions and 10 per cent growth in 2010 after years of flat production.

Suncor, meanwhile, has been fighting fires both real – it reported its third upgrader blaze in five months this week – and figurative, after executives told shareholders they were disappointed with the company`s first quarterly results as a merged entity.

Read the full article here.

 

[Ally]

Global Oil demand seen rising in 2010

World oil demand will rise this year due to growing economic activity in developing countries in Asia, the International Energy Agency said Thursday as it bumped up its forecasts.

The Paris-based IEA, which advises oil-consuming countries, predicted in its monthly report that oil demand will average 86.5 million barrels a day this year, or 1.6 million barrels a day more than in 2009.

The IEA`s previous report, in January, had estimated daily demand in 2010 of 86.3 million barrels. The estimate for 2009 was unchanged at 84.9 million barrels a day, the IEA said.

At the same time, the agency said that if recent upward revisions to global economic growth “fail to live up to expectations,” oil demand in 2010 could be lower by around 400,000 barrels a day.

The IEA said factors behind its view that developing countries would account for the full increase in oil demand included a closer correlation between rising economic activity and higher oil consumption in non-OECD countries and the expanding use of non-oil based fuels in industrialized ones for heating, power generation and other activities.

Read the full article here.

 

[Ally]

`Massive glut` blamed for holding back oil prices

When oil was wallowing below $35 (U.S.) a barrel a year ago, one of the big complaints from many market followers was that the price didn`t reflect the fundamentals of the oil market. Things may have been bad in terms of the market for trading oil futures, but the actual supply/demand dynamics didn`t warrant such a low – or so the argument went.

Over the past year, the global economy turned a corner, financial and credit markets stabilized, and oil has rebounded to roughly double its price of a year ago.

But, ironically, the argument about the fundamentals not being reflected by the price has become even more compelling today – only in reverse.

`A MASSIVE GLUT`
Toronto-Dominion Bank economist Dina Cover wrote in a report this week that despite the improved global economic picture, "[the] blow to the crude oil market is going to continue to be felt for some time, as the fundamental picture remains quite weak."

She noted that while demand from the developing world had returned to healthy growth by the fourth quarter, oil consumption among OECD countries – which still dominate world oil consumption – remains below levels from a year ago.

Read the full article here.

 

[Ally]

Venezeula`s Chavez declares energy crisis

President Hugo Chavez signed a decree declaring an energy emergency in Venezuela to facilitate his government`s efforts to ease severe power shortages.

"We`ve been working on this because it`s a necessity. The truth is, it`s an emergency," Mr. Chavez said Monday.

Under the decree, Venezuelans who use more than 500 kilowatt-hours of electricity per month — an estimated 24 per cent of all residential consumers — must reduce their consumption by 10 per cent or be required to pay a 75 per cent price increase.

Those who increase consumption by 10 per cent will be slapped with a 100 per cent price increase. If they boost usage by 20 per cent, the price hike rises to 200 per cent.

Venezuela imposed electricity and water rationing in December to prevent a collapse of the electricity grid as water levels behind the Guri Dam fell to critical lows. The dam supplies most of Venezuela`s electricity.

Read the full article here.

 

[Ally]

Billionaire expects city to pick up arena bill

The city would pay for a new Oilers arena itself, while the Katz Group would invest $100 million in the accompanying sports and entertainment complex, according to details of the $1.4-billion project released Tuesday.

The city could borrow money to build the arena, which it would own, then pay off the loan with a "community revitalization levy" using property taxes generated by the rest of the development, said Bob Black, the company`s vice-president of sports and entertainment.

He expects the federal and provincial governments to help with infrastructure, including a connection to the LRT station planned nearby.

The Katz plan includes shops, restaurants and two office towers linked by a 4,000-square-metre pedestrian bridge to a $400-million arena across 104th Avenue.

The enclosed "Winter Garden" walkover, featuring stores and standing eight metres above the road, will tie the district together, Black said.

Read the full article here.

 

[Ally]

The Downtown Arena

Click here to see all articles related to the proposed Edmonton Arena.

 

[Ally]

Two retailers avoiding fuel from oilsands

In another public relations blow to Alberta`s oilsands, two major U.S. retailers have announced they`re shunning bitumen-derived fuels in favour of greener gasoline for their fleets.

And irate Albertans are calling on people to shun them back, including one Calgarian who is taking the bitumen ban to heart -- and his wallet.

"I don`t want anything more to do with (them)," Jeff Thornborough said. "As far as I`m concerned, if someone doesn`t want to do business with me -- and I`m an Albertan and take it personally -- I don`t want to do business with you."

Organic foods grocery chain Whole Foods Market, which doesn`t operate in Alberta, and homeware concern Bed Bath & Beyond, which has three Edmonton locations, said Wednesday they were actively seeking alternatives to oilsands fuels to reduce their carbon footprints.

Both Whole Foods and Bed Bath & Beyond were responding in part to a campaign launched last year by U.S.-based Forest Ethics to move corporations away from bitumen-derived oil. The campaign targeted Fortune 500 companies, warning them the use of "dirty" fuels from Canada`s oilsands put their brands at risk.

Read the full article here.

 

[Ally]

Oil Sands revenue tops Alberta`s royalty stream

The torrent of billions in oil sands megaproject spending has, until now, produced a relative trickle in energy royalty revenues for the government of Alberta.

But in a sign of how quickly Fort McMurray is transforming the province`s economy, oil sands revenues are expected to overtake income from any other energy sources in the current fiscal year , which ends in June, for the first time.

The growth in revenues from the unconventional oil contrasts with plunging proceeds from Alberta`s traditional primary breadwinner – natural gas . Slumping prices and lower production will reduce the province`s take from natural gas by a stunning 70 per cent this year, compared with the 2008-09 budget year.

The growing importance of the oil sands to the province`s financial well-being helps explain Premier Ed Stelmach`s refusal to accept calls from environmental groups to slow expansion plans to reduce the growth of greenhouse-gas emissions and the local consequences on land and water.

Oil sands royalties will outstrip conventional crude royalties by a modest $35-million this year, the government forecast in the budget tabled yesterday. By 2010-2011, the province expects oil sands royalties to roar to $3.2-billion, a 75-per-cent hike that will see bitumen production provide 45 per cent of the province`s total oil and gas royalties.

Read the full article here.

 

[Ally]

Calgary, Victoria only CMAs in Canada to see home prices drop: StatCan

Calgary and Victoria were the only metropolitan areas in the country to record declines in new home prices from November to December, says Statistics Canada.

In releasing its New Housing Price Index, the federal agency said the two cities saw monthly drops of 0.2 per cent while for the entire country new home prices rose by 0.4 per cent on a monthly basis.

On a year-over-year basis, Calgary registered the third biggest drop in prices at 3.1 per cent. Edmonton led the country with new home prices falling 9.4 per cent from December 2008 to December 2009. Victoria`s decline was 8.2 per cent.

Nationally, prices dropped by 0.9 per cent in the past 12 months.

Read the full article here.

 

[Ally]

BP weighs $1.30-billion oilsands deal

LONDON–British oil major BP PLC is in talks to pay about $1.3 billion to buy a majority stake in a privately held Canadian company with large reserves of Alberta oilsands deposits, the Sunday Times reported.

Value Creation is in financial trouble and faces being put into receivership on Monday, the newspaper reported Sunday.

The British oil giant`s offer would see it set up a joint venture with Value Creation, increasing its oilsands holdings by 50 per cent.

BP officials declined to comment on the report.

Reliance Industries Ltd, which operates the world`s biggest oil refining complex in India, is thought to have made a rival $2 billion takeover bid, but BP is understood to be the preferred partner, the paper said.

Value Creation Inc.`s largest block of leases, Terre de Grace, covers about 750 square kilometres in the Athabasca region of Alberta.

Read the full article here.

 

[Ally]

Ranks of self-employed Albertans swell

CALGARY - Jackie Peterson worked for three years in the oilpatch doing mergers and acquisitions research for a major company.

But the 27-year-old thought she needed a career change -- something more interesting and dynamic.

So last summer, Peterson, who has a science degree from the University of Calgary, started her own company, Boost Public Relations, and today is thriving with 10 clients in several major Canadian cities.

"I love working with people.

I have a curious mind. This was a natural choice," said Peterson. "I saw a need and I tried to fill it.

Read the full article here.

 

[Ally]

Inflation rates up in Calgary, Alberta; slower than national average

CALGARY - The rate of inflation in Calgary and in Alberta rose in January compared with a year ago but both were less than the rise in consumer prices across the country.

Statistics Canada reported Thursday that consumer prices in Calgary rose by 1.4 per cent from January 2009 to January 2010 while in Alberta it was up 1.7 per cent on a year-over-year basis.

Nationally, consumer prices rose 1.9 per cent in the 12 months to January, following a 1.3 per cent increase in December 2009. January`s increase was the largest since November 2008.

In December, Calgary experienced a 0.2 per cent annual increase while in Alberta it was 0.8 per cent.

The federal agency said the national increase in the Consumer Price Index was due primarily to gasoline prices. In January, gasoline prices were 23.9 per cent higher than they were in January 2009. This follows a 25.6 per cent rise in the 12 months to December 2009.

Read the full article here.

 

[Ally]

One in six Alberta jobs tied to natural gas, study finds

The natural gas industry employs almost 600,000 people in Canada, a number that could grow as Canada increases production of the cleaner-burning fuel, a new report said Tuesday.

According to the study prepared by IHS Global Insight for America`s Natural Gas Alliance, gas accounted for about $106 billion of Canada`s gross domestic product in 2008 -- a little less than seven per cent -- including $73 billion in direct contributions and another $33 billion in indirect benefits.

Direct and indirect employment of 599,000 amounted to 3.5 per cent of Canada`s jobs and $31 billion in payrolls.

"I found that to be surprising. ... Those points were larger than what I had expected," said Eric Marsh, EnCana Corp.`s executive vice-president of natural gas economy. "What is really significant is the opportunity to grow in the future."

The study was commissioned by America`s Natural Gas Alliance (ANGA), an industry advocacy group formed last March, representing 33 of North America`s largest independent natural gas exploration and production companies.

Read the full article here.

 

[Ally]

Bark Beetles flee their own calls

The pine beetle is so tough that not even chainsaws, fire and icy cold have stopped its destructive march across North American forests.

But new research suggests there is a new weapon that could halt the tiny insect in its tracks -- the sound of its own voice.

Researchers at the Northern Arizona University believe they have found a silver bullet by digitally altering the sound of the bark beetles` squeaky, clicking calls. The sound drives them so buggy they flee or attack each other.

"We want to try to have them escape or be deterred from a log and we`ve been able to successfully do that in a laboratory," lead researcher Richard Hofstetter said Tuesday.

"We`ve also been able to witness them be very aggressive and chewing each other.

Read the full article here.

 

[Ally]

Alberta stores post biggest gain in two years

EDMONTON — Retail sales for Alberta rebounded in December from the previous month with their strongest gain in two years.

But on a year-over-year basis, Alberta posted Canada`s weakest improvement on December 2008 sales, according to Statistics Canada Friday.

The federal agency said retail sales in Alberta were up by only 0.7 per cent over the same month a year earlier. On a monthly, basis they rose by 1.8 per cent to $4.7 billion. Only New Brunswick with a two-percent hike performed better month-to-month.

Nationally, retail sales increased to $35.3 billion, up 0.4 per cent by month and up 6.7 per cent annually.

Retail sales have been trending upward since the start of 2009, said Statistics Canada.

"In contrast, shoppers in Alberta have been relatively slow in returning to their typically robust spending levels," said ATB Financial senior economist Todd Hirsch.

Read the full article here.